Sustainability of Kenya’s Total Public Debt

Abstract

This paper analyzed the sustainability of Kenya’s total public debt using the present value budget constraint approach. Unit root tests were conducted to test for the stationarity of the budget balance. The country’s debt was found to be stationary when two structural breaks were taken into account. Break dates were identified as 1996 and 2001. Cointegration tests were also carried out and the results indicated Kenya’s total public debt was weakly sustainable. This paper also examined the uses of foreign debt and recommended that the government should increase its focus on the transport, communication and the energy sectors as these sectors have the ability to generate revenue that can be used to repay debt.